The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand Kforce Inc., our operations, and our present business environment. This MD&A should be read in conjunction with "Item 1. Financial Statements" of this report on Form 10-Q.

This overview summarizes the MD&A, which includes the following sections:

• Executive Summary - an executive summary of our results of operations for the first quarter ended March 31, 2009.

• Critical Accounting Estimates - a discussion of the accounting estimates that are most critical to aid in fully understanding and evaluating our reported financial results and that require management's most difficult, subjective or complex judgments.

• New Accounting Standards - a discussion of recently issued accounting standards and their potential impact on our consolidated financial statements.

• Results of Operations - an analysis of Kforce's unaudited condensed consolidated results of operations for each of the three months ended March 31, 2009 and 2008, which have been presented in its unaudited condensed consolidated financial statements. In order to assist the reader in understanding our business as a whole, certain metrics are presented for each of our segments.

• Liquidity and Capital Resources - an analysis of cash flows, off-balance sheet arrangements, stock repurchases and the impact of changes in interest rates on our business.

EXECUTIVE SUMMARY

The following is an executive summary of what Kforce believes are important results as of and during the three months ended March 31, 2009, which should be considered in the context of the additional discussions herein and in conjunction with its unaudited condensed consolidated financial statements. We believe such highlights are as follows:

• Net service revenues for the three months ended March 31, 2009 decreased 7.5% to $231.3 million from $250.0 million in the comparable period in 2008.

• Search fees for the three months ended March 31, 2009 decreased 56.0% to $7.8 million from $17.8 million in the comparable period in 2008.

• Flex revenues for the three months ended March 31, 2009 decreased 3.8% to $223.5 million from $232.2 million in the comparable period in 2008.

• Gross profit margin decreased 320 basis points for the three months ended March 31, 2009 to 31.2% from 34.4% in the comparable period in 2008, primarily resulting from a decline in Search fees.

• Flex gross profit margin decreased 60 basis points for the three months ended March 31, 2009 to 28.8% from 29.4% in the comparable period in 2008, primarily resulting from the compression in the spread between our bill rates and pay rates.

• Selling, general and administrative expenses as a percentage of revenue were 27.4% and 28.2% for the three months ended March 31, 2009 and 2008, respectively, which was primarily due to decreases in, among other factors, commission expense, bad debt expense and certain discretionary expenses.

• Diluted earnings per share for the three months ended March 31, 2009 decreased 55.6% to $0.08 from $0.18 in the comparable period in 2008.

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, estimates, assumptions and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note A, Summary of Significant Accounting Policies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1. Financial Statements. Please also refer to our annual report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 11, 2009 for a more detailed discussion of our critical accounting estimates.

NEW ACCOUNTING STANDARDS

See the "New Accounting Standards" section within Note A, Summary of Significant Accounting Policies, of the Notes to the Unaudited Condensed Consolidated Financial Statements for a more detailed discussion.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2009 and 2008

Net service revenues for the three months ended March 31, 2009 were $231.3 million, a decline of 7.5% over the comparable period in 2008. The decline was primarily due to our FA and Tech segments, which had year-over-year declines in net service revenues of 29.5% and 8.2%, respectively. We also experienced weakness in our HLS segment, which had a year-over-year decline in net service revenues of 2.2%. Excluding the impact of the acquisition of dNovus, our GS segment experienced a year-over-year increase in net service revenues of 7.9%. Net service revenues for our GS segment including dNovus, for the three months ended March 31, 2009 and 2008 were $27.9 million and $18.1 million, respectively, which represents an increase of 54.5%. These operational results were achieved during a recessionary U.S. macro-economic environment, which included continued turmoil in the credit and financial markets, declining GDP, an increase in the unemployment rate for individuals with college degrees, and increasing jobless claims.

Kforce continues to experience: (i) significant reductions in Search revenue, which declined 56.0% during the quarter ended March 31, 2009, as compared to the comparable period in 2008; (ii) a decrease in Flex revenues of 3.8% over the comparable period in 2008 and (iii) declines in Flex gross profit margins across all of our segments. As a result, our gross profit margins decreased 320 basis points to 31.2% as compared to 34.4% for the quarter ended March 31, 2008 and decreased 230 basis points as compared to the fourth quarter of 2008. Although there can be no assurance that historical trends will continue, Search activity and Flex gross margins historically decrease heading into the troughs of an economic cycle, increase after economic conditions have shown sustained improvement, and are the strongest during the peak of an economic cycle. In addition, we believe that Flex demand generally increases before demand for Search activity increases.

The economic uncertainties in which we currently operate make it challenging for Kforce to predict the near-term future, and the U.S. recession continues to have a significant adverse impact on our business. Management believes that the GS segment will have more stability during economic down cycles, primarily as a result of its mix of revenue being entirely concentrated in Flex revenue, the nature of its operations generally being less dependent upon growth of the U.S. economy and the relative duration of its contracts. This is also a result of the growth of the federal agencies that are customers of Kforce, such as the Department of Defense and the Department of Homeland Security, and the use by many of these agencies of outsourced labor. We do not currently anticipate any significant adverse impacts to our GS segment as a result of the presidential and congressional elections because of the government agencies in which our GS segment participates. The GS segment, however, has experienced delays in the timing of project awards.

We believe that initiatives undertaken during the last several years, such as restructuring both our back office and our field operations, and upgrading our corporate systems and other technology, have increased our operating efficiencies and have also enabled us to be more responsive to our clients. We believe our field operations model, which allows us to deliver our service offerings in a disciplined and consistent manner across all geographies and business lines, as well as our highly centralized back office operations, are competitive advantages and keys to our future growth and profitability. In addition, during the most recent economic up cycle, our experienced management team has been successful in reducing Kforce's dependence on Search revenue, significantly increasing the GS segment's annualized revenues, divesting itself of non-core businesses, and the further development in and refinement of our national recruiting center in support of our field teams and national accounts. We believe that our diversified portfolio of service offerings, which are primarily domestic, will also be a key contributor to our long-term financial stability.

We expect the remainder of 2009 to continue to be an extremely difficult economic environment; the extent of which is dependent upon the depth and length of the current U.S. recession. As a result, we expect to see reductions in Search and Flex revenue, especially in our Tech and FA segments and gross profit compression across all segments, when compared to 2008 results.

Net Service Revenues. The following table sets forth, as a percentage of net service revenues, certain items in our unaudited condensed consolidated statements of operations for the three months ended March 31:

                                                               2009      2008
      Net Service Revenues by Segment:
      Tech                                                      50.8 %    51.3 %
      FA                                                        17.5      23.0
      HLS                                                       19.6      18.5
      GS                                                        12.1       7.2

      Net service revenues                                     100.0 %   100.0 %


      Revenue by Time:
      Flex                                                      96.6 %    92.9 %
      Search                                                     3.4       7.1

      Net service revenues                                     100.0 %   100.0 %

      Gross profit                                              31.2 %    34.4 %
      Selling, general and administrative expenses              27.4 %    28.2 %
      Depreciation and amortization                              1.3 %     1.6 %
      Income from continuing operations, before income taxes     2.3 %     4.4 %
      Income from continuing operations                          1.4 %     2.6 %
      Net income                                                 1.4 %     2.9 %

The following table details net service revenues for Flex and Search revenue by segment and changes from the prior period for the three months ended March 31:

                                               Increase
                  (in $000's)       2009      (Decrease)        2008
                  Tech
                  Flex            $ 114,928         (4.8 )%   $ 120,731
                  Search              2,610        (64.6 )%   $   7,369

                  Total Tech      $ 117,538         (8.2 )%   $ 128,100

                  FA
                  Flex            $  36,000        (24.4 )%   $  47,591
                  Search              4,574        (54.2 )%       9,991

                  Total FA        $  40,574        (29.5 )%   $  57,582

                  HLS
                  Flex            $  44,602         (2.7 )%   $  45,824
                  Search                638         54.5 %          413

                  Total HLS       $  45,240         (2.2 )%   $  46,237

                  GS
                  Flex            $  27,957         54.5 %    $  18,093
                  Search                 -                           -

                  Total GS        $  27,957         54.5 %    $  18,093

                  Total Flex      $ 223,487         (3.8 )%   $ 232,239
                  Total Search        7,822        (56.0 )%      17,773

                  Total Revenue   $ 231,309         (7.5 )%   $ 250,012

Flex Revenues. The primary drivers of Flex revenues are the number of consultant hours worked, the consultant bill rate per hour and, to a limited extent, the amount of expenses incurred by Kforce that are billable to the client.

With the exception of our GS segment, Kforce experienced Flex revenue declines during the three months ended March 31, 2009 across all segments, which is primarily a result of the difficult macro-economic environment. Our FA segment was most significantly impacted by the difficult macro-economic environment.

We believe our Flex revenues for our largest segment, Tech, have held up better than expected based on previous economic downturns, which we believe is primarily a result of our highly skilled people and our field operations model. We believe that this model allows us to deliver our service offerings in a disciplined and consistent manner across all geographies and business lines. This delivery model includes our national recruiting center, which we believe has been effective in increasing the quality and speed of delivery to our clients, particularly our national accounts. We also believe that unlike the late 1990s and early 2000s, our customers generally have not over-hired during the most recent economic expansion. Also, we believe that there was no exaggerated technology bubble similar to that which developed prior to the last economic downturn.

Although our GS segment demonstrated strong results in 2008, the difficult macro-economic environment impacted results in the first quarter of 2009. However, as previously mentioned, we expect this business to be more stable during these difficult economic times given it is less dependent upon the growth of the U.S. economy. While we continue to monitor legislative initiatives of the new administration, we do not expect any legislation to significantly negatively impact 2009 results. The majority of our GS contracts contain an initial one-year term with four option years, which are typically exercised. At the end of this term, the contract award typically goes through a competitive bidding process to retain the contract. Although our GS segment has a very high historical success rate in the re-compete process given its strong relationships with its customers, a significant portion of GS contracts are subject to this process during 2009 and a loss of re-compete business could negatively impact 2009 performance.

The Clinical Research business within our HLS segment saw a decrease in activity as we progressed through the fourth quarter of 2008 and into the first quarter of 2009, reflecting the cost-cutting initiatives of large pharmaceutical companies as well as delays in hiring activity resulting from the mergers within this sector. Given this, we anticipate a decrease in volume for the remainder of 2009 in this business. The Healthcare business within our HLS segment, which primarily consists of professionals providing medical coding and transcription services to hospitals and other healthcare facilities, saw its Flex revenues impacted by declining trends in hospital census, which we expect may continue for the remainder of 2009.

The continued shift towards business with higher rates such as GS, Tech and Clinical Research as well as our focus on pricing and customer profitability contributed to an increase in the average bill rate per hour to $59.43 for the three months ended March 31, 2009 compared to $58.42 for the first quarter of 2008, an increase of 1.7%. The impact of the increase in the average bill rate per hour was partially offset by a decline of 5.3% in the number of total Flex hours worked.

The following table details total Flex hours for each segment and percentage changes over the prior period for the three months ended March 31:

                                             Increase
                      (in 000's)    2009    (Decrease)      2008
                      Tech          1,806         (2.6 )%   1,855
                      FA            1,048        (19.9 )    1,308
                      HLS             502         (3.8 )      522
                      GS              314         64.4        191

                      Total hours   3,670         (5.3 )%   3,876

The changes in billable expenses, which are included as a component of net services revenues are primarily attributable to increases or decreases in project work. The following table details total Flex billable expenses for each segment and percentage changes over the prior period for the three months ended March 31:

                                                    Increase
               (in $000's)                2009     (Decrease)       2008
               Tech                      $   923         70.0 %    $   543
               FA                             60        (53.1 )        128
               HLS                         4,059        (19.4 )      5,035
               GS                            348        510.5           57

               Total billable expenses   $ 5,390         (6.5 )%   $ 5,763

Search Fees. The decrease in Search fees is attributable to both the decrease in the number of placements as well as changes in the average fee earned on each placement. Our GS segment does not make permanent placements.

As was previously mentioned, Search activity historically decreases heading into the troughs of an economic cycle, increases after economic conditions have shown sustained improvement, and is the strongest during the peak of an economic cycle. Over the last several quarters, Kforce has experienced significant sequential declines in Search fees, which was expected as the U.S. economic environment declined sharply. Sequential declines in the three months ended March 31, 2009 and December 31, 2008 were 38.8% and 17.5%, respectively, over the prior quarterly periods.

Over the last several years, Kforce has made a concerted effort to de-emphasize the contribution of Search fees to overall net service revenues, which is primarily a result of the highly volatile nature of the Search business as well as the costs that must be invested in establishing the workforce. As a result of the current economic environment, Kforce expects continued declines in Search fees in 2009.

Total placements for each segment and percentage changes over the prior period were as follows for the three months ended March 31:

                                               Increase
                                       2009   (Decrease)      2008
                    Tech                188        (60.6 )%     477
                    FA                  353        (56.2 )      806
                    HLS                  44        (46.7 )       30

                    Total placements    585        (55.4 )%   1,313

The average placement fee for each segment and percentage changes over the prior period were as follows for the three months ended March 31:

                                                      Increase
                                            2009     (Decrease)        2008
            Tech                          $ 13,915         (9.9 )%   $ 15,438
            FA                              12,945          4.5        12,390
            HLS                             14,491          2.0        14,206

            Total average placement fee   $ 13,372         (1.2 )%   $ 13,538

Gross Profit. Gross profit on Flex billings is determined by deducting the direct costs of services (primarily flexible personnel payroll wages, payroll taxes, payroll-related insurance, and subcontractor costs) from net Flex service revenues. In addition, consistent with industry practices, gross profit dollars from Search fees are equal to revenues, because there are generally no direct costs associated with such revenues.

The following table presents, for each segment, the gross profit percentage and percentage change over the prior period for the three months ended March 31:

                                                       Increase
                                             2009     (Decrease)      2008
             Tech                            28.1 %         (9.4 )%   31.0 %
             FA                              39.3          (10.9 )    44.1
             HLS                             29.8           (4.8 )    31.3
             GS                              35.1           (2.2 )    35.9

             Total gross profit percentage   31.2 %         (9.3 )%   34.4 %

Changes in the amount of Search fees as a percentage of total revenue can significantly impact total gross profit percentage because Search revenue contributes 100% to gross profit, as previously discussed. Given this dynamic, Kforce monitors gross profit as a percentage of Flex revenues, which is referred to as the Flex gross profit percentage. This provides management with the necessary insight into the other drivers of total gross profit percentage, such as changes in volume evidenced by changes in Flex hours billed and changes in the spread between bill rate and pay rate for Flex ("Flex Rate").

The decrease in Search gross profit for the three months ended March 31, 2009, compared to the same period in 2008, was $10.0 million, composed of a $9.8 million decrease in volume and a $0.2 million decrease in rate.

The following table presents, for each segment, the Flex gross profit percentage and percentage change over the prior period for the three months ended March 31:

                                                         Increase
                                               2009     (Decrease)      2008
          Tech                                 26.4 %         (1.1 )%   26.7 %
          FA                                   31.6           (2.5 )    32.4
          HLS                                  28.8           (6.2 )    30.7
          GS                                   35.1           (2.2 )    35.9

          Total Flex gross profit percentage   28.8 %         (2.0 )%   29.4 %

The decrease in Flex gross profit for the three months ended March 31, 2009, compared to the same period in 2008, was $3.8 million, $1.2 million of which resulted from a decrease in the Flex Rate and $2.6 million resulted from a decrease in volume.

The Flex gross profit percentage was negatively impacted in the first quarter of 2009 by the macro-economic environment and the compression that occurred in the spread between Kforce's bill rates and pay rates, which is primarily due to the lag in Kforce's ability to reduce pay rates as quickly as bill rates decline. We expect continued pressure on our bill rates in 2009 but we will be actively managing, to the extent possible, our pay rates. Additionally, payroll taxes, particularly unemployment taxes, which are highest in the first quarter of the year because employees have not yet earned sufficient wages to exceed the basis on which taxes are payable, have risen in recent years and may continue to rise and negatively impact Flex gross profit.

Selling, General and Administrative Expenses ("SG&A"). For the three months ended March 31, 2009 and 2008, total commissions, compensation, payroll taxes, and benefit costs as a percentage of SG&A represented 82.6% and 80.7%, respectively. Commissions and related payroll taxes and benefit costs are variable costs driven primarily by revenue and gross profit levels, and associate productivity. Therefore, as gross profit levels change, these expenses would also generally be anticipated to change but remain relatively consistent as a percentage of revenues.

The following table presents these components of SG&A expenses along with an "other" caption, which includes bad debt expense, lease expense, professional fees, travel, telephone, computer and certain other expenses, as an absolute amount and as a percentage of total net service revenues for the three months ended March 31:

                                                               % of                     % of
(in $000's)                                         2009      Revenue        2008      Revenue
Compensation, commissions, payroll taxes and
benefits costs                                    $ 52,378       22.6 %    $ 56,786       22.7 %
Other                                               11,032        4.8        13,595        5.5

Total SG&A                                        $ 63,410       27.4 %    $ 70,381       28.2 %

SG&A expenses as a percentage of net service revenues decreased 80 basis points, or 0.8%, for the three months ended March 31, 2009 as compared to the comparable period in 2008. This was primarily attributable to the following:

• Increase in compensation and benefits of 2.1% of net service revenues, which was primarily related to: (i) a certain portion of compensation is fixed and does not decline as net service revenues decline; (ii) an increase in the cost of providing health insurance to our employees; (iii) an increase in severance costs paid to terminated employees and (iv) an increase in incentive-based compensation. In order to align expenses with the declining revenue stream, Kforce elected to keep 2009 base salaries at 2008 levels for our top 50 leaders, which include our named executive officers, our executive team, top field leadership and certain other corporate officers.

• Decrease in commission expense of 2.1% of net service revenues, which was primarily attributable to: (i) a decline in the percentage contribution of Search fees, which generally have a higher commission rate, to total gross profit; (ii) productivity being driven by a favorable shift in associate tenure; and (iii) an overall reduction in headcount.

• Decrease in bad debt expense of 0.6% of net service revenues, which was primarily attributable to: (i) a decrease in accounts receivable write-offs as compared to the first quarter of 2008, which is reflective of Kforce's efforts to aggressively manage outstanding customer balances and (ii) the improvement in the aging of our accounts receivable.

• Decreases in discretionary expenses such as travel, telephone and office-related expenses including postage and supplies as a percentage of revenue, as a result of our cost containment focus.

Depreciation and Amortization. The following table presents depreciation and amortization expense and percentage changes over the prior period by major category, for the three months ended March 31:

. . .